MHP Newsletter December 2016

December 7, 2016

As 2016 draws to a close and we wind up an extremely busy 12 months, we are left wondering (again) where the year has gone.

2016 will of course be remembered for the devastating earthquake which has dealt a major blow to towns and rural communities in the South Island, as well as Wellington’s CBD, just six years after the first Christchurch earthquake.

It has also been a year of surprises with Brexit, Trump’s election, John Key’s resignation and the Irish beating the All Blacks thrown in for good measure.

We hope you enjoy reading our final newsletter for 2016 – please get in touch if you have any questions or comments. We would like to wish all our contacts a restorative summer break and a successful year in 2017.

Comments from Ron Mackersy

The commercial property market has continued to strengthen over the course of this year and researchers agree that this expansion is likely to continue over the medium term at least. In this high-demand, low-supply environment, cap rates on top quality properties are now at a premium – near or under 6% in many locations.

With interest rates and margins firming, initial returns around the 6% mark will become the norm. While this is lower than the levels investors have become accustomed to in recent years, it is worth noting that it still represents a solid premium over bank rates.

The keys to achieving strong returns when starting with low yields are long lease terms and built in rental growth. When looking at new investment opportunities, we are encouraging investors to consider where returns are likely to be in three to five years’ time as a result of income growth.

We are looking forward to bringing two significant offerings to the market in the near future: the Hoyts entertainment centre being constructed on a site bordered by Colombo, Tuam and Lichfield Streets in Christchurch CBD; and Steel & Tube’s new facility being built at Glassworks Industry Park in Hornby, Christchurch. Both will have long initial lease terms and rental growth which are essential in the current market environment.

News from Dale Robertson’s desk

One of my key areas of focus recently has been the safety of tenants in our management portfolio in Wellington following the 7.8 magnitude earthquake. My team and I have spent time with tenants inspecting properties and we were pleased to note that the buildings we manage do not appear to have suffered any damage. We are continuing to work with tenants to monitor any issues that may arise following the earthquake.

Here in Christchurch the central city rebuild is gathering pace. Shops are open in the new ANZ Centre and BNZ Centre fronting Cashel St and there is a real buzz in the area in the lead up to Christmas, as well as the announcement of a new central-city farmers market and food precinct (pictured).

farmers-market

The Innovation Precinct is also developing quickly around the new Vodafone and Kathmandu buildings (managed by MHP). More details on the Innovation Precinct are elsewhere in this newsletter.

In October we were pleased to welcome Harvey Norman to its new premises in the former Mitre 10 building which MHP manages at Remarkables Park, Queenstown. A full update on the new store, which has been trading well since opening, is later in this newsletter. We also look forward to welcoming French bakery Ma Boulangerie to the renovated building this month. The French couple running the bakery were profiled in the Mountain Scene recently: read the “France comes to Frankton” article here.

Elsewhere in the South Island we are bedding in several new additions to our management portfolio including:

  • Progressive Engineering’s warehouse in Invercargill
  • Asmuss Steel’s facility at Izone in Rolleston
  • Concision Panelised Technology’s warehouse (also at Izone)
  • the Southern Hospitality showroom just off Manchester St in central Christchurch.

 

Changes to Civil Defence Amendment Act

Parliament has passed a 2016 Amendment Bill to the Civil Defence Emergency Management Amendment Act. The bill includes new powers to require building owners to undertake damage assessments of buildings in a civil defence event, and to share information with certain parties including local councils and owners & tenants of neighbouring buildings. The bill is available to view here.

MHP would like to reassure shareholders that we have procedures already in place that will be implemented in the event of a Civil Defence emergency. This includes routine building inspections following earthquakes. We also have considerable experience to draw on following the Christchurch earthquakes, to help ensure the safety of our tenants, neighbours and the public should an emergency occur.

MHP Capability Statement

MHP has produced a Capability Statement outlining our key metrics, management services, expertise and a selection of properties under management. An electronic version is available to download below in PDF format, or if you would like a printed copy please email Anita Brosnan: abrosnan@mhpl.co.nz.

Click here to download the MHP Capability Statement (PDF).

Harvey Norman opens in Remarkables Park Town Centre, Queenstown

Building work on the former Mitre 10 premises at Remarkables Park is now complete, with Harvey Norman Computer & Electrical open and trading well in their new store.

The store, which opened on October 17, will feature a commercial kitchen display area showcasing high-end commercial appliances available to commercial customers and developers of hotels, apartments, rest home businesses and the like. We understand this commercial kitchen display is one of only three in New Zealand.

In addition to the Harvey Norman tenancy, three additional smaller tenancies were developed within the former Mitre 10 premises. One of the tenancies has been leased to Ma Boulangerie (French bakery) and they are currently undertaking their fit out work. The bakery anticipates trading prior to Christmas. A lease deal is being finalised for Harvey Norman to occupy a further unit for storage, and Colliers International is currently sourcing a tenant for the third unit.

Read more about the store’s opening on the Remarkables Park website.

harvey-norman

Harvey Norman’s new Queenstown store at Remarkables Park

Colliers International’s top 10 predictions for 2017

Colliers International has released its top 10 market predictions for 2017. In the report, Colliers researchers look at what will be the major trends and moves across the property sector for next year.

The Top 10 Predictions 2017 report is available to download on the Colliers website

Christchurch Innovation Precinct continues to take shape

The first public outdoor gathering spaces in the Innovation Precinct were completed in October 2016. The area is located directly outside the new Vodafone and Kathmandu buildings (managed by MHP). They are planned to cater for public events such as markets, food stalls and outdoor dining.

The new development behind the restored McKenzie and Willis building facade on High St, opposite the Vodafone building, is also proving popular with tenants. Josh Emmett’s Madam Woo restaurant will open on the ground floor and Telstra is in discussions to take part of the office space vacated by Wynyard.

new-innovation

New Innovation Precinct square, Vodafone building and restored McKenzie & Willis facade

Proposed University of Waikato campus to boost Tauranga CBD

By 2020, the Bay of Plenty will have a new, University-led tertiary campus in the heart of Tauranga city. The site of the proposed development is opposite the new TrustPower headquarters on Durham St, Tauranga – which is part of MHP’s management portfolio. The development is expected to provide a boost to Tauranga’s CBD, which is facing ongoing competition and challenges from several convenience retail centres and malls in and around Tauranga.

Read more about the proposed development on the Bay of Plenty Times website.

taurunga-cbd

An artist’s impression of how the new Tauranga CBD university campus will look

MHP website and LinkedIn page

Throughout 2016 we have boosted our digital presence through our new website and LinkedIn page. We are using both these channels to share the latest updates about MHP, news about tenants in our management portfolio and other relevant links. We’d like to encourage you to follow us on LinkedIn and feel free to comment on the posts and discussions.

Team member profile

Emily Dennison

Emily joined MHP in January 2016. Prior to joining the team she spent six years working for Stride Property Limited in a support role to the Centre Manager at Remarkables Park Town Centre in Queenstown.

Emily’s primary role with MHP is acting as Property and Facilities Manager for Terrace Junction, one of the key properties within MHP’s Queenstown portfolio.

emily-dennison

MHP Newsletter October 2016

October 7, 2016

2016 has shaped up to be quite an interesting year for the property market. Macro factors which are contributing to the increased demand for commercial property include interest rates hitting record lows and the forecast very low rate of inflation.

Correctly sourced and funded commercial property is looking very attractive as an investment proposition in this environment, however a shortage of good stock is a significant issue nationwide.

Assets displaying the key fundamentals of location, build quality and tenant covenant are being snapped up quickly in the main centres, with competition among investors – both New Zealand and overseas-domiciled – compressing yields further.

In this newsletter we cover some key additions to our management portfolio, our new Properties in Focus series as well as the green credentials awarded to three Christchurch office assets under our management.

Please get in touch if you have any comments or suggestions – we look forward to hearing from you.

Comments from Ron Mackersy

We have been talking with banks in the last weeks reviewing their attitude going forward for syndicate investments.

There is certainly a change in thinking from all banks – it is almost as if they are self policing looking carefully at deals going forward. Development projects are out of favour.

Although base interest rates continue to slide bank margins are on the increase. Pricing with margins are generally 60 to 75 points higher than three months ago. Banks are clearly having difficulty in attracting local deposits, so the cost of funds is increasing. This in turn will lead eventually to cap rates (ratio of rent to purchase price excluding costs) moving back up not down.

In the meantime, get used to gross returns for quality properties being between 6% and 7.5% – lower than what we have achieved before.

Interesting times ahead.

News from Dale Robertson’s desk

Last month I attended Property Council’s National Conference in Queenstown. As always it was an impressively-run and well-attended event, with speakers and delegates from around New Zealand and Australia. Among the speakers, which represented the property, finance and health & safety arenas among others, was Australian ex-PM Paul Keating and Minister for Economic Development Steven Joyce.

I took away the following key themes from the event:

  • The remarkable speed at which technology is changing and developing. Perhaps more than at any other time in the recent past, technological advancements are now affecting all tenants and their business models. This makes for exciting times, but it also means tenants’ properties may become obsolete for them in as little as five years due to technology progressing in leaps and bounds.
  • There are no logical reasons for interest rates or inflation to rise in the current environment. This will require adjustment to cope with the impacts of very low or no inflation.
  • Positive market conditions may continue for the next five to 10 years.
  • More economic methods of delivering buildings, both residential and commercial, are being developed.

The interest rate and inflation situation, and increased demands from tenants, mean there will certainly be some exciting challenges for property owners and managers going forward.

Property Council New Zealand National Conference

“Going forward, companies and governments need leadership and courage” – Australian ex-PM Paul Keating at the recent Property Council conference in Queenstown

Portfolio additions

Over the past year, the size of MHP’s management portfolio has more than doubled. Along with this increase in size has come an evolution in the constitution of our portfolio. We still manage a number of high quality industrial properties, however we have begun to balance this with the addition of several prime new office and bulk retail assets around the country. While these buildings tend to require more management input than industrial properties, they are excellent assets and are often considered trophy holdings by their owners.

Properties recently added to our management portfolio include:

  • Progressive Engineering facility, Invercargill
  • Tyremax facility, Invercargill
  • Asmuss Steel facility, Christchurch (pictured below)
  • Kathmandu building, Christchurch CBD
  • Vodafone ‘InnoV8’ building, Christchurch CBD
  • Trustpower HQ, Tauranga
  • Concision Panelised Technology facility, Rolleston, Christchurch
  • Southern Hospitality Building, Manchester St, Christchurch

In Queenstown, the redevelopment and new fit-out of the former Mitre 10 premises at Remarkables Park is well underway and Harvey Norman is confident of being open for Labour Weekend in its new space. French bakery Ma Boulangerie, which will occupy a small unit in the property, is on track to be open before Christmas.

asmuss

Asmuss Steel building, Christchurch

MHP website and LinkedIn page

Throughout 2016 we have boosted our digital presence through our new website and LinkedIn page. We are using both these channels to share the latest updates about MHP, news about tenants in our management portfolio and other relevant links. We’d like to encourage you to follow us on LinkedIn and feel free to comment on the posts and discussions.

Property in Focus: Trustpower HQ, Tauranga

In the first of a bi-monthly series profiling the properties in MHP’s management portfolio, we recently had a look at Trustpower’s stunning new headquarters in Tauranga. This is an award-winning, landmark building which we are proud to manage on behalf of its investor owners.

The Trustpower Property in Focus is available to download on the MHP website.

Keep an eye on our website and LinkedIn page for upcoming Properties in Focus.

Durham St Trustpower

Trustpower HQ, Durham St, Tauranga

MHP-managed buildings earn green credentials

Two flagship assets in MHP’s management portfolio – the Kathmandu and Vodafone buildings in Christchurch’s Innovation Precinct – have been awarded 5 Green Star NZ – Office Design 2009 Certified Ratings from the New Zealand Green Building Council.

In addition, another MHP-managed office building in Christchurch – the IAG building at 14 Show Place, Addington – recently became the first building in New Zealand to achieve a 5 star NABERSNZ whole building rating, following a refurbishment project undertaken by IAG and Goodman.

Read our media release on the green awards on the MHP website.

iag-show-place-exterior-front1-0515-copy

IAG Building, 14 Show Place, Christchurch

Team member profile

Kirita Sio

Kirita joined MHP as a Senior Property Manager in our Christchurch office in April 2016.

Prior to joining MHP, Kirita was a commercial property manager for CBRE, undertaking full asset management of a small diverse portfolio of retail, industrial and commercial buildings based in Christchurch.

Kirita has a passion for property and has nearly 20 years’ experience in the industry, including in the residential and government sectors. She has built a reputation for being efficient and customer focused with a ‘can do’ attitude, forming strong working relationships based on trust and delivering on agreed targets.

kirita

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